Does Perfection Trump ERP Protection?

Does A Perfect Lawyer Need to Buy ERP?

If you’ve made the decision to retire or stop your practice – do you need an Extended Reporting Period endorsement (ERP)? If you stop practice and cancel or fail to renew your professional insurance policy, you will not have coverage in the future for claims generated out of legal services you provided in the past when you did have professional insurance in place. To get that coverage you need an ERP. What this endorsement does is this – it provides coverage for claims made in the future that just might arise from legal services you delivered in the past. Without it, you are uninsured. Bare!

ERP is the Shield at your Back

If you fully retire, you may qualify for a FREE ERP (check with your agent to see if you qualify). But if you are stopping your practice and you do not qualify, you will be faced with an important and difficult decision about buying the ERP. AND, it’s not cheap! The price is measured in multiples of your current policy premium. That will be thousands of dollars, not hundreds. Consequently, many lawyers talk themselves out of buying it. After all, if you’ve been doing your job perfectly why would you need protection when you’re ready to walk away?

You have been doing everything perfectly, right? That’s…technically possible, I suppose.

Perfect is not a Good Protection Plan

The prospect of digging deep for a few extra thousand bucks invariably generates a kind of cerebral fog clouding reason. Lawyers use a curious kind of analysis to talk themselves out of the need to buy an ERP. The past becomes a haze of perfection while a clear, carefree future comes into focus.

“But Duane, there is nothing from my past legal work that could be a problem in the future. I don’t need an ERP.”

This always makes me wonder why they bought LPL insurance in the first place, if they are so certain they will never have a claim. Let’s ponder a statistical reality that might muddy that rosy view.

A Look at the Numbers

First, let’s divide all the professional claims against lawyers into two categories: 1. Unanticipated but understandable. 2. Unanticipated and completely out of the blue, unexplainable.

Which do you think is the largest group? Yes, category 2. By a lot!

Unexpected, Unexplainable, Unknowable

We buy many kinds of insurance for all the important things in our lives. For the most part, we buy insurance to cover the “known unknowns,” things like fire, natural disasters and bad drivers. But with the practice of law, we need to recognize we are buying insurance for the unknown unknowns. None of us is smart enough to know what we could not be expected to know. Sure, it makes us uncomfortable to acknowledge that the world is full of these inexplicable, unpredictable elements that could, without warning, have tremendous effect on our lives. We all prefer the illusion of control.

ERP is Real Control

Once you accept that the likeliest professional claim will be the one you never saw coming – in effect, the unlikeliest – you can get ahead of it. That’s the nice thing about ERP, it covers you from the blow you did not see coming. I get it, it’s not an easy decision. ERP is expensive and it comes at a particularly difficult time; a transition point in your professional career. But the smart decision is to err on the side of caution. LPL insurance and specifically an Extended Reporting Period endorsement is about securing a comfort level so you can walk into that rosy future without fear of the hazy past. Looked at in this light, premiums are never wasted. They buy you stability and the financial security you owe to yourself and those who depend on you.